The US is tremendously benefiting from doing business with India as 372 acquisitions worth USD 21 billion and 127 greenfield investments worth USD 5.5 billion by Indian companies has created nearly 60,000 jobs between 2004 and 2009, a report said Tuesday.
The report "How America Benefits from Economic
Engagement with India,' was released by influential Congressman Jim McDermott. India's Deputy Ambassador to the US Arun Singh was also present on the occasion.
The study follows US President Barack Obama who last year ended years of tax incentives to those US companies which create jobs overseas in places like the southern Indian city of Bangalore through outsourcing. Instead, the incentives would now go to those creating jobs inside the US, in places like the Buffalo city, he had said.
"We will stop letting American companies that create jobs overseas take deductions on their expenses when they do not pay any American taxes on their profits," Obama had said.
The report released today investigates one specific aspect of globalisation of the American economy, namely, the United States-India business relationship.
During 2004-2009, 90 Indian companies made 127
greenfield investments worth USD 5.5 billion, and created 16,576 jobs in the US. Greenfield investments are a form offoreign direct investment where a parent company starts a new
venture in a foreign country by constructing new operational facilities from the ground up.
The top three destination states for greenfield investments were Minnesota, Virginia and Texas, in that order.
It is noteworthy that the software and IT services sector received less than 15 per cent of total investment, and the bulk of investments went into mining, manufacturing, and other industries, the report said.
The top three states in terms of jobs created were Ohio, Texas, and California, the report said.
During 2004-2009, 239 Indian companies made 372 acquisitions in the United States.
The five US industrial sectors that received the most greenfield investment were Metals; Software & IT Services; Leisure & Entertainment; industrial machinery, equipment & tools; and financial services, accounting for almost 80 per
cent of total greenfield investment in the US.
Giving a comprehensive analysis of America's economic engagement with India for the period 2004 to 2009, the report has been jointly produced by University of Maryland, India-US
World Affairs Institute and Federation of Indian Chambers of Commerce and Industry.
"We were able to obtain the deal value for only 267 of these transactions. The total value of the 267 acquisitions was USD 21 billion, or USD 78.7 million per acquisition," the report said.
Of these 267 acquisitions, we were able to obtain the numbers of jobs created/saved for only 85 transactions, which came to over 40,000 jobs, it added.
However, the total number of jobs created or saved by all 372 transactions must be much higher, the report pointed out.
Five states that attracted the most M&A investments from Indian companies accounted for 75 per cent of total deal value: Georgia, New Jersey, Michigan, California, and Texas.
The five leading US sectors receiving M&A investments from India were: Manufacturing; IT & IT Enabled Services; Biotech, Chemicals & Pharmaceuticals; Automotive; and Telecom
- for a total of 83 percent of total deal value.
The bulk of M&A investments by India Inc. in the US were in manufacturing and other industrial sectors, rather than in services for which India is well known.
The report said, the value of US acquisitions by Indian companies fell in 2008 and then again in 2009 even more steeply, a result of the worldwide recession.
"It is however interesting to note that greenfield investments rose through 2008, achieving their highest level that year, and then registered a decline in 2009, though the decline was not as steep as for acquisitions. This is possibly because making a greenfield investment is a longer-term decision, while acquisitions are often opportunistic and accomplished relatively more quickly," it said.